Upload
hadiep
View
216
Download
2
Embed Size (px)
Citation preview
Experiences and Emerging Trends Related to Information and Communications Technology, Innovation and Productivity in Korea
Knowledge Sharing Forum on Development Experiences: Comparative Experiences of Korea and Latin America and the Caribbean
Seung Keon Kim Woo Soo Jeong Joon Ah Park
IDB-DP-407
Knowledge and Learning Sector
DISCUSSION PAPER Nº
October 2015
Experiences and Emerging Trends Related to Information and Communications Technology, Innovation and Productivity in Korea
Knowledge Sharing Forum on Development Experiences: Comparative Experiences of Korea and Latin America and the Caribbean
Seung Keon Kim Woo Soo Jeong Joon Ah Park
Korea Association for ICT Promotion
October 2015
Copyright © Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.
Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.
Note that link provided above includes additional terms and conditions of the license.
The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.
http://www.iadb.org
2015
i
Contents
Executive Summary .................................................................................................................... 1
1. Introduction ............................................................................................................................. 2
1.1. Rationale for the Study .................................................................................................. 2
1.2. ICT Diffusion in Korea ................................................................................................. 3
2. The ICT Sector: Facts and Figures ......................................................................................... 5
2.1. ICT and Economic Growth ........................................................................................... 5
3. The Role of Institutions .......................................................................................................... 8
4. Public Policies and Programs................................................................................................ 10
4.1. Analysis of ICT Policy Trends in Korea .................................................................... 10
4.2. Fostering the ICT Industry .......................................................................................... 15
4.3. Support Program for Startup Companies .................................................................... 16
4.4. Program for SMEs: Global Partnership Program ....................................................... 17
5. Case Studies .......................................................................................................................... 18
5.1. Joonggok Jeil Traditional Marketplace and ICT Technology ................................... 18
5.2. Smart Farm .................................................................................................................. 19
6. Conclusion ............................................................................................................................ 20
References ................................................................................................................................. 23
ii
Tables
Table 1 Trend of Production from Korea’s ICT Industry ............................................................... 6
Table 2 Economic Growth Contribution Rate ................................................................................ 6
Table 3 Trade Balance of Korea’s ICT industry ............................................................................. 7
Table 4 Progress of Promotion of the Master Plan for National Informatization ......................... 12
Table 5 Major Promotion Plan for ICT Development and Fostering Industry ............................. 15
Table 6 Global Partnership Program result in 2014...................................................................... 18
Figures
Figure 1 OECD Fixed (wired) Broadband Subscriptions per 100 Inhabitants by Technology - June 2014 ........................................................................................................................................ 4
Figure 2 OECD Mobile (wireless) Broadband Subscriptions per 100 Inhabitants by Technology - June 2014 ........................................................................................................................................ 4
Figure 3 Trend of Production from Korea’s ICT Industry ............................................................. 5
Figure 4 Structure of Production from Korea’s ICT Industry in 2013 ........................................... 6
Images
Image 1 Internet Access Devices installed at the Joonggok Jeil Marketplace ............................. 19 Image 2 Smart Farm...................................................................................................................... 20
1
Executive Summary
One of the world’s poorest countries following the devastation of the Korean War, the
Republic of Korea is now the world’s fifth largest trading partner and a major manufacturer
of semiconductors, LCDs (liquid crystal displays), digital TVs, mobile phones, automobiles,
shipbuilding, and steel. In 1962, Korea had only US$110 of GNI (gross national income) per
capita, but this figure dramatically rose to US$ 10,770 in 1995. As of 2007, GNI per capita
had reached US$19,730, almost 180 times that of 45 years ago.
The ICT sector has played an important role in this transformation, being the single
most important engine of economic growth in the country. This research analyzes the impact
ICT has had on the Korean economy, illustrating the main government’s policies in the area
and discussing their effectiveness.
The Korean ICT development strategy has been based on the following elements, that
should be considered by any country willing to use ICT as a growth engine: 1) leadership and
commitment, 2) human capacity building, 3) institutional arrangements, 4) legal framework
and 5) presence of a funding mechanism for the implementation of ICT master plans, capable
of operating even in times of economic crisis.
2
1. Introduction
1.1. Rationale for the Study
Barriers between nations have blurred in the age of global competition as companies compete
not only to secure a competitive advantage in local markets but globally as well. The ability
to develop new products and services by using information, technology and knowledge is
becoming more and more significant. Innovation is defined as the ability of companies to
produce new products and upgrade efficiency in business processes to improve
competitiveness. ICT development is critical to obtain such innovation.
Recently, industries have been characterized by the phenomenon of accelerated
convergence and increasing value through technology recombination. In particular, the ICT
industry is entering a new paradigm of growth through the convergence of traditional
industries. Within this new era of “creative economy,” there is a rising expectation for
industries to adopt ICT technology in order to enhance competitiveness and increase
operational efficiency.
The Korean government prioritizes ICT policies because they are expected to
contribute to the well-being of citizens. The government recognizes the pivotal role ICT
convergence will play in social, economic and cultural areas. The trickle-down benefits of
ICT convergence include cost saving, enhancement of service quality, improved accessibility,
and the creation of jobs, all expected to positively influence the daily lives of the general
populace.
The phenomenal transformation of the Republic of Korea from one of the world’s
poorest countries to one of the richest is widely known, from only US$67 of GNI per capita1
in 1953 to US$26,205 in 2013, almost 394 times that of 60 years ago. And the ICT sector is
an important factor in this growth, contributing 16.1 percent to total economic growth in 2010,
34.9 percent in 2011 and 15.9 percent in 2013. 2 In addition, Korea has experience in
overcoming economic crises such as the Asian financial crisis in the late 1990s and the global
financial crisis in 2008 by incorporating ICT.
Upgrading the efficiency of companies and activating growth in existing industries
through innovative ICT technology is not limited to Korea, but it is also applicable to
1 Bank of Korea Economic Statistics System (http://ecos.bok.or.kr). 2 International Trade Statistics 2014 (World Trade Organization). 3 Bank of Korea Economic Statistics System (http://ecos.bok.or.kr). 4 Rate of internet use of at least once within the past one month, 3 years or older.
3
countries like those in Latin America looking to achieve higher productivity growth. A joint
study between Korea and these states is an opportunity for mutual benefit from cooperation.
1.2. ICT Diffusion in Korea
In Korea, where it was difficult to access even basic telephony until the beginning of the
1980s, a total of 23 million landline telephones had been connected by 2002, increasing the
landline phone penetration rate per household to above 140 percent. In addition, the
penetration rate of mobile phones had reached 100 percent by 2010. All Koreans are
currently able to access these means of communications.
Today, Korea is recognized as a highly advanced country in ICT development. In
2013, the rate of internet usage in Korea3 was 82.1 percent, a 3.7 percent increase compared
to the previous year. Internet users numbered 40.08 million (a 1.96 million increase compared
to the previous year) and 98.1 percent of total households had access to broadband at the
minimum speed of 1-Mbps. Fixed broadband subscriptions in Korea reached 37.9 percent in
June 2014, and the country had the second highest percentage of fiber fixed broadband
connections, 66.3 percent. Further, in 2013 the country Korea introduced 3G along with
active promotion of the next generation network and services.4 Now, the Korean government
is striving to take the initiative in completing a 5G mobile network that is 1,000 times faster
than 4G. The government plans to invest US$1.5 billion by 2020 with the goal of dominating
the 5G market.
By investing in an advanced ICT infrastructure, Korea is striving to secure global
competitiveness of key IoT (Internet of Things)5 technologies, which will be the growth
engine for the next generation of the ICT industry.
3 Rate of internet use of at least once within the past one month, 3 years or older 4 Measuring the Information Society, ITU, 2014. 5 Definition of IoT (Internet of Things): Intelligent infrastructure connecting everything for exchange of information and mutual communication between things and humans with information technologies (Source: IoT Activation Plan, 2013, MSIP).
4
Figure 1 OECD Fixed (wired) Broadband Subscriptions per 100 Inhabitants by Technology - June 2014
Source: OECD, 2014.
Note: Mobil broadband penetration in Korea is above 100%; penetration ranks 6th among OECD countries with a subscription level of
105.3%.
Figure 2 OECD Mobile (wireless) Broadband Subscriptions per 100 Inhabitants by Technology - June 2014
Source: OECD, 2014.
These figures show that Korea has reached the highest level of ICT development and
informatization. The country was also given the highest ranking for four consecutive years,
2010-13, in the ICT Development Index (IDI), as measured by the ITU (International
Telecommunication Union), a specialized United Nations agency that compares and monitors
5
progress in ICT development among member countries. In 2014, Korea was ranked second,
after Denmark, in terms of advanced ICT access, usage and skill, followed by Sweden,
Iceland and the United Kingdom.
2. The ICT Sector: Facts and Figures
2.1. ICT and Economic Growth
The ICT industry has compensated for Korea’s relatively few natural resources by playing a
significant role in the country’s economic growth. Production generated by the ICT industry
increased from US$44.8 billion in 1995 to US$399.5 billion in 2013, a growth rate of 12.9
percent compounded annually for 18 years (8.9 times). For the last seven years production
has maintained a high growth rate of 7.4 percent.
Figure 3 Trend of Production from Korea’s ICT Industry
Source: KAIT, 2014.
The ICT industry in Korea has concentrated on hardware; software accounts for a
very small proportion. Flat panel displays and semiconductors account for a large part of
hardware, followed by communication devices and devices based on information and
communication applications.
6
Table 1 Trend of Production from Korea’s ICT Industry
(Unit: Million USD)
Source: KAIT, 2014.
Figure 4 Structure of Production from Korea’s ICT Industry in 2013
Source: KAIT, 2014.
Table 2 Economic Growth Contribution Rate
(Unit: %, real) Category 2010 2011 2012P 2013P
Overall industry Economic growth rate 6.5 3.7 2.3 3.0
ICT industry
growth rate 12.5 14.8 3.1 5.5
Proportion of GDP of the ICT 8.6 9.6 9.7 9.9
Economic growth contribution rate 16.1 34.9 11.5 15.9 Source: Bank of Korea, 2014.
Year 2007 2008 2009 2010 2011 2012 2013
ICT Service 49,742 52,296.8 54,561.2 56,891.5 59,393.9 61,540.2 62,577.3
ICT Device 190,955 209,964.8 227,295.5 279,355.2 283,446.6 285,142.9 304,694.7
Software 19,958.5 23,600.8 23,452.9 24,554 26,623.6 28,449.8 31,936.1
Total 260,655.5 285,862.4 305,309.6 360,800.7 369,464.1 375,132.9 399,208.1
7
In 2013, the ICT industry posted a 5.5 percent growth rate compared with 2012. In
particular, the export of ICT in 2013 reached US$169.5 billion, an increase of 9.1 percent
anchored in increased export of mobile phones. The largest amount of export ever recorded, it
comprised 30.2 percent of overall exports and contributed enormously to Korea’s trade
surplus. In fact, the ICT industry accounted for US$88.6 billion of Korea’s trade balance in
2013, while the trade balance of all industries was about US$44 billion. Therefore, it can be
concluded that the role of the ICT industry for the Korean economy has been so large that the
country’s total trade balance might have shown a large deficit if the ICT industry had been
stagnant.
Table 3 Trade Balance of Korea’s ICT industry (Unit: USD, Hundred Million, %)
Source: IITP, 2014.
ICTs have led the development of the Korean economy. As of 2013, Korea’s ICT
industry accounted for 8.9 percent of its GDP, and its contribution to GDP growth was as
much as 16 percent.6 The establishment of the ICT infrastructure and proliferation of ICT
services have attracted development of a hardware industry for communications equipment
such as devices and network equipment. Cutting-edge devices like smart phones provide an
optimal ICT ecosystem that promotes creation of new services, applications, and contents.
6 Bank of Korea Economic Statistics System (http://ecos.bok.or.kr).
Classification 2010 2011 2012 2013
Export
All
Industries 4,664.0 5,552.1 (19.0) 5,481.7 (-1.3) 5,596.3 (2.1)
ICT 1,539.4 1,566.2 (1.7) 1,522.4 (-0.9) 1,694.1 (9.1)
Import
All
Industries 4,252.5 5,244.1 (23.3) 5,195.4 (-0.9) 5,155.9 (-0.8)
ICT 756.2 815.4 (7.8) 779.3 (-4.4) 808.2 (3.7)
Trade
Balance
All
Industries 411.5 308.0 282.9 440.5
ICT 783.2 750.8 722.8 885.9
8
Furthermore, ICTs have strengthened the fundamentals of the Korean economy and laid the
groundwork for the future by enhancing efficiency and productivity, creating jobs and
developing new businesses.
3. The Role of Institutions There has been a sustained political commitment to ICT development from the highest
positions of government. Every administration has called for a strong initiative supported by
sound policy strategies and restructured governmental organization responsible for
implementation in a timely manner. This has allowed different agencies and ministries to
coordinate their respective informatization policies. The establishment of the Ministry of
Information and Communication (1994) was pivotal for the design and implementation of
national ICT policies and initiatives.
In the 1990s, Korea’s government had a strong determination that the country would
not lag behind in informatization even though it came late to industrialization. Having
selected ICT as the new impetus for economic growth, the Korean government established
master plans for the development of the information society beginning in the mid-1990s;
there was the first Master Plan for Informatization Promotion (1996) and CYBER KOREA
21 (1998). The master plan concept continued into the 2000s with e-KOREA VISION (2003).
It is often said that robust government initiatives are a key factor behind Korea’s success in
the ICT sector. Over the entire process of planning and implementing national projects, the
Korean government has effectively used various policy tools, ranging from master plans to
the legal framework and regulation, to funds and organizations.
There were several rounds of an ICT national plan, and each plan was supported by
relevant laws and regulations. The Computer Networks Act (1986), Informatization
Promotion Act (1995), and E-Government Act (2001) ensured legal status and strong support
for funding. For the ICT Promotion Fund established in 1996, the government invested a
minimum of US$0.7 billion and a maximum of US$1.5 billion yearly in ICT R&D,
developing ICT human resources, standardization, creation of an R&D environment and
loans to ICT ventures. In summary, Korea was equipped with the necessary legal framework,
organizations and funding to jumpstart its ICT industry.
Because Korea lacked the technological capability required for industrial
development the government established technological institutes in the 1960s to overcome
this weakness in private industries and to help them adapt to new technologies. Notably, the
9
government established the Korea Institute of Science and Technology (KIST) in 1966 and
the Korea Science and Technology Information Center (KORSTIC) in 1962. Since 1976, the
Electronic and Telecommunications Research Institute, ETRI, focusing on ICT research, has
made an immense effort to advance Korea’s remarkable growth in the ICT field. The pattern
is for the government to announce a clear technology goal within the global market and then
encourage private innovation through public R&D projects. For example, in the 1980s, a one-
phone-per-household initiative brought significant changes to the everyday lives of Koreans,
and was realized by the development of TDX, Time Division Exchange, a fully digital
electronic switching system developed by ETRI. Korea started to dominate the world’s
semiconductor industry by its development of 4M DRAM successfully. During the 1990s
CDMA (code division multiple access) phones were commercialized for the first time
anywhere. In the 2000s ETRI developed Terrestrial DMB, WiBro, and 4G LTE Advanced,
which became the foundation of Mobile Communication. Recently, ETRI is supporting
communication and convergence by developing SAN Technology (a cutting-edge ICT that
converges with shipbuilding) as well as a Korean to English world-class portable automatic
interpretation technology and development of adjustable display technologies, such as
transparent display. ETRI continues to contribute to R&D projects and technology
development in the ICT sector.
Along with research institutes, the need for scientists and engineers of top quality also
arose. The transformation of teaching-oriented universities into research-oriented universities
was critical. To encourage this transformation, the government provided financial support to
those universities with excellent research performance, and many of Korea’s major
universities responded with various programs designed to change university education in
Korea. The Korean Advanced Institute of Science and Technology (KAIST) is a good
example of the type of research-oriented university that Korea supports. Since its foundation
in 1971, KAIST has received preferential funding from the government and has been able to
recruit the nation's best students for training as world-class, quality engineers. Pohang
University of Science and Technology (POSTECH) was founded with similar aims by the
Pohang Steel Corporation in 1986, the first private sector initiative of its kind in Korea. Using
the KAIST model, the government founded the Gwangju Institute of Science and Technology
(GIST) in 1995 and recently established the Daegu-Gyungbuk Institute of Science and
Technology (DGIST) in 2004 to promote balanced regional development. Korea was able to
lower the risk of product development by creating a pre-market through government-led
10
R&D projects. These also contributed a foundation for ICT development by attracting top
human resources and nurturing a research culture.
From 2000 to 2002, the government offered internet and computer literacy programs
to 10 million people, 21 percent of the population, including housewives, the disabled,
farmers and even prison inmates. Inexpensive computers were distributed to allow more
people to gain access to the internet and more than 2,000 free-of-charge information facilities
were set up across the country in already existing community centers. In 1997, the
government announced that PC providers and the internet service providers (ISPs) would
provide PCs and fixed internet connection to all K-12 schools for free or at discounted rates.
The firms provided 290,000 PCs and free internet connection as well as computer usage
classes at schools for affordable prices. This effort created a huge demand and market for the
ICT industry by knowledgeable domestic consumers. Students familiar with using PCs and
the internet contributed to sales of household PCs up to 2 million in the first half of 1999. The
sales amount was a 59.2 percent increase over that of 1998, reaching 1.1815 trillion KRW
(about U$1.07 billion).7 The high literacy rate and school enrollment were also contributing
factors in the widespread adoption and usage of ICT.
4. Public Policies and Programs
4.1. Analysis of ICT Policy Trends in Korea
The 1980s were challenging for Korea. Communications conditions and core infrastructure
related to the ICT industry were lagging in both quality and quantity. As an underdeveloped
country, Korea was experiencing problems of chronic telephone congestion, aging of
facilities, low rates of automation, and divergence between urban and rural areas. In response,
the government prioritized the development of ICT to secure state-level competitiveness in
the global arena. From 1987, the government began to digitalize major administrative data
regarding the nation, such as resident information, land and finance. These projects evolved
into a matrix of e-government infrastructure that digitalizes all administrative businesses and
connects administrative organizations online.
Another effort to increase capacity by expanding infrastructure through public
7 IT Industry Trend Report (2000)
11
enterprises involved the installation of 10 million telephone lines by 1987. As the government
pushed forward in the complete digitalization of public administration by introducing PCs to
public departments, Korea paved the way for development of ICT through expansion of its
communication infrastructure. It can be said that the 1980s was a time when there was a
sustained policy effort to reinforce competitiveness in the communications industry.
Although there was a foreign exchange crisis, Korea was able to overcome it with relative
ease through ICT development, and it became an opportunity for economic progress. In
essence, Korea exerted efforts to develop a digital information system, and the result was use
of e-government, CDMA service, and more than 10 million educated internet users, among
other benefits.
Korea established the foundation for national digitalization in the 1990s. ICT policies
and the significance of ICT development increased all around the world in accordance with
the proliferation of the internet. In response to accelerating changes in world trends and to
push forward with development of the ICT industry, the Korean government revised the
Government Organization Act in December 1994 and reorganized administrative departments
on a large scale. At that time a new department, the Ministry of Information and
Communication, was established.
The ministry promoted the significance and functions of ICT propagation and took
command of the digitalization of information and IT industry-related policy functions in
order to push forward with a balanced ICT supply and demand policy. In addition, in August
1995, the ministry enacted the Framework Act on Informatization Promotion to promote
national digitalization and thereby provide a legal footing for ICT development. In 1996, the
first master plan for the national informatization process in the next five years was drafted to
reflect changes in the informatization paradigm and steadily put forward a new vision and
strategy. Under the plan, the government promoted an overall and systematic ICT policy by
establishing and executing implementation plans for each department each year. That same
year, an informatization promotion fund was set up as a stable foundation for ICT
development by intensively investing and allocating funds to ICT-based fields, e-government,
technical development, and training of manpower.
In the 1990s Korea exerted all out efforts at the government level to build an
information superhighway which could serve as the new social infrastructure for the 21st
century. In 1995, the General Promotion Plan for Building the Base for the Information
Superhighway involved building a nationwide optical transport network; the ATM network
was completed after a total investment of 3.2 billion KRW up to 2005. During this process,
12
the government actively encouraged competition in the communications industry to promote
investments and to build a low-cost network environment.
By supporting competition among the common carriers and startups by new local call
operators, the government promoted private investment and invited foreign investment to
catalyze the early development of a high-speed network. With increased convergence of
wired and wireless communications, broadcasting and internet, the government had in place a
nationwide network where broadband multimedia services could be provided stably through
expansion of the communications infrastructure under the Master Plan for Building of
Broadband Convergence Network (BcN) (2004-10). This plan to build the next-generation
ICT infrastructure allowed diverse convergence-type services of communications,
broadcasting and internet after overcoming the technical limits of the existing information
superhighway. As a result, Korea came to possess a high-level ICT infrastructure with 17.86
million high-speed internet subscribers.
The IT839 strategy (2004) was initiated to enhance economic growth through the
virtuous cycle of developing ICT infrastructure for service and industry. The strategy
encompasses eight key services (including HSDPA, W-CDMA, Wibro, Broadband
Convergence Service, DMB, and DTV Service), three advanced infrastructures (BCN, USN,
and Soft Infraware), and nine growth engines (including Mobile Communications, Telematics,
Broadband Home Network Device, Digital TV and Broadcasting equipment). It has
contributed to the propagation of new ICT-based services in Korea in an environment where
everyone can access the internet whenever and wherever they want by tapping into a
sophisticated network of wired and wireless infrastructure. Despite achieving national access,
Korea hasn’t slowed efforts to build an intelligent future network encompassing a foothold
for Internet of Things (IoT), Giga Internet, LTE Mobile Communications, and Wi-Fi Service.
Table 4 Progress of Promotion of the Master Plan for National Informatization
Classification Year of Establishment Title of the Plan Period Vision
The 1st Jun. 1996 Basic Plan for Promoting Informatization 1996~2000 ⦁ Realization of the world’s highest level of
informatization by 2010
The 2nd Mar. 1999 Cyber Korea 21 1999~2002 ⦁ Building up of the creative knowledge -based nation
The 3rd Apr. 2002 e-Korea Vision 2006 2002~2006 ⦁ Building up of e-Korea, a global leader
The 3rd (Revised) Dec. 2003 Broadband IT Korea
Vision 2007 2003~2007 ⦁ Building up of the Broadband IT Korea
The 3rd May 2006 Master Plan for u-Korea 2006~2010 ⦁ Contribution to building up of the advanced Korea through realization of u-Society on the
13
worlds’ highest level u-Infrastructure
The 4th Dec. 2008 Master Plan for National Informatization 2008~2012
⦁ Realization of the advanced knowledge and information society with creativeness and confidence
The 4th (Modified) Mar. 2012 Master Plan for national
informatization 2008~2012 ⦁Realization of knowledge and information society under basis of creativity and credibility
The 5th 2013 Master Plan for National Informatization 2013~2017 ⦁ Realization of knowledge and information
society under basis of creativity and credibility
The 2000s brought change. Efforts to move the core area of ICT evolution from the
public to the private sector began with the presidency of Lee Myung Bak. During a period of
stagnation in industrial development and the absence of ICT oversight, the government
responded to increasing calls to dissolve the Ministry of Information and Communications,
and then establish the Ministry of Science, ICT and Future Planning. This new ministry was
expected to lead efforts fostering a creative economy.
Throughout the decade following the Electronic Government Act of 2001, the
government designated eleven major national projects as an institutional base for electronic
government. The government actively supported the propagation of informatization in the
private and public by initiating 31 major e-government projects over five years, beginning in
2003. In the second half of the 2000s, the government pushed an informatization policy
focused on value creation, directed to solving urgent issues such as a decreasing birth rate, an
aging population, and low labor productivity. The best-known policy was the 2010 campaign
for a smart work environment followed by the Smart e-Government Plan in 2011. The goal
was to increase “smart work” to include 30 percent of the entire working population by 2015
through the establishment of smart work centers, improvement of mobile working
environments, and establishment of a remote collaboration system. In addition, the
government has worked toward improved and smarter e-government services that reflect
rapid changes in the mobile environment and the new ICT. Thus, Korea has achieved national
informatization in a short period by comprehensively pursuing medium- and long-term plans
and systematically linking separate informatization plans drafted by each department of
government.
In March 2012, in line with the dynamic changes in informatization both in the
domestic and international environment, the government modified the 2008 master plan for
national informatization to reflect recent paradigm and technology evolution from the
conventional concept of IT Power Korea to a more contemporary Smart Korea. The new plan
reinforced old targets and direction while updating objectives for each department. The
direction of the new strategy reflected recent changes in the informatization environment.
14
Announced in 2013, the fifth master plan for national informatization (2013-17)
presented fifteen tasks conforming to four core strategies for a creative economy that utilizes
innovative ICT. The key tactics are: 1) to foster new national industries to lead a creative
economy, to create demand through propagation of new technologies, to reinforce the ICT-
based creative corporate capability, and to build a foothold for new internet businesses; 2) to
realize intelligent administration to guarantee the health of the people through ICT, to build
an affluent and smart environment for innovative ICT utilization by the nation and society, to
establish an ICT-based national safety network and aim for the sustainable and new
intellectualization of SOC (service on a chip); 3) to reinforce future-oriented ICT capabilities,
promote a healthy internet culture, and to realize that an abundance of indiscriminate
information will reinforce the innovative spirit of the people; 4) to recognize the need for
sophisticated digital infrastructures for a creative Korea, to build an intelligent future network,
to expand the basis for a safe nation, and to upgrade the national information resource system.
The fifth master plan will be assessed as a national strategy in 2017.
The ICT policy that has driven Korea for the last 20 years or so has increased overall
efficiency of the nation and society, enhanced productivity, and allowed Korea to develop
world-class ICT infrastructures quickly. As a result, ICT is firmly embedded in the daily lives
of the populace. People are able to surf the internet rapidly and conveniently, and are able to
handle shopping and business conveniently through mobile services without any restriction in
time or place. The culture of communication and sharing through social networking services
(SNS) is commonplace. Furthermore, mobile and new ICT-based economic and social
activities are prevalent, and diverse mobile public services are provided for the benefit and
safety of the people; for example, SOS services (sensor observation service) and smart phone
reporting of inconvenience in daily lives. Such changes in the utilization of ICT show that
informatization is leading the national economy and society as a key driving force that is
creating value by enhancing productivity and efficiency, instead of simply being a useful tool.
In an era when creative activities and ideas have economic value, the role of
informatization will expand further. It is expected to contribute to creating new demands and
resolving pending social issues by prompting the creative utilization of knowledge and
information, and by convergence based on the sophisticated informatization that has
accumulated so far. Recent technologies like IoT (Internet of Things), Big Data and Cloud
are likely drivers for further change in the field of national informatization. New ICT has
allowed people to become part of a hyper-connected and intelligent society, with
opportunities for new markets. Policies should address these newfound opportunities and the
15
creative economy which emphasizes ICT as a key driver for creating new industries and
which is the economic paradigm of President Park Geun-Hye’s administration. With
accelerated developments in the ICT ecosystem closely linked with contents, platforms,
networks and devices, an important need for an integrated strategy without set demarcations
of domain is widely recognized.
4.2. Fostering the ICT Industry
Recognizing that the information and communication industry is promising, Korea has
invested in developing key products such as television sets, switchboards, semiconductors,
computers, mobile communication and TFT-LCD. The government and private enterprise
have worked together through large-scale joint projects to develop these industries so that
they are competitive both at home and abroad. In the 1980s, the Development of an
Electronic Switching System (TDX) and the Joint Development Project of ULSI
Semiconductor Technology (4M, 16M, 64M DRAM) were pushed forward. In the 1990s the
Development of CDMA Mobile Communications Technology and the Next-Generation Flat
Panel Display (TFTLCD, PDP) Technology Development Project were pushed. As the
Republic of Korea entered the 2000s, the IT839 Strategy (eight major services, three major
infrastructures and nine key growth drivers) was promoted. In particular, the success of the
TDX Development System has been the foundation for large-scale joint development projects
for semiconductor and mobile communications.
Table 5 Major Promotion Plan for ICT Development and Fostering Industry
Project Name Development Period
Major Development Targets Major Achievements
Development of Electronic Switching
System(TDX)
1982~1986 Development of
Switching System (500, 9,600 Lines)
⦁ Developed for the 10th time in the world, achieved 100% automation of telephone exchange (1987), laid foundation for development of information and communications
Joint Development of
ULSI Semiconductor
Technology
1987~1993 Development of
Prototypes of 4M, 16M, 64M and DRAM
⦁ Developed a prototype using 64M DRM for the 1st time in the world (1992), ranking 1st in production of memory elements (2001), ranking 1st in production of DRAM since 1998
Development of CDMA Mobile
Communications Technology
1991~1995
Development of CDMA Digital Mobile
Communications Terminal and System
⦁ Commercialized CDMA for the 1st time in the world (1996), established the foundation for ranking 1st in production of CDMA mobile phones (2001) and ranking
16
1st in production of mobile phones
Development of Next-Generation
Flat Panel Display (TFTLCD, PDP)
Technology
1995~2001 Development of 30”-Class TFT-LCD and
PDP
⦁ Emerged as the largest TFT-LCD (Large Size: More than 10”) producing country in the world (since 2001)
IT839 Strategy 2003~2007
8 Major Services, 3 Major Infrastructures
and 9 Major New Growth Engines
⦁ Started the services to use DMB (2005) and Wibro (2005) for the 1st time in the world
4.3. Support Program for Startup Companies
In recent years, Korean economy has shifted from a labor/capital (industrial) economy to a
knowledge/information (knowledge) economy. Today, it is moving to a creative economy. It
means that economic growth is expected to be the result of extraordinary imagination and
ideas that conjure up disruptive products and services. This new paradigm centered on
creating new markets and jobs through innovation, intensively fostering ventures and small
and medium businesses with a high likelihood of job creation.
In this context, Korea has established its own plan to utilize scientific technologies
and ICT capabilities under the leadership of the Ministry of Science, ICT and Future
Planning (June 2013). The goal of a creative economy involves the creation of new jobs and
markets through creativity and innovation, reinforcement of global leadership within the
creative economy, and realization of a society where creativeness is respected and displayed
to the fullest.
One important expression of this creativeness in the economy is considered to be the
creation of new technological enterprises. Then, a diverse array of political support is
available to Korean startups, so that they can become global rather than remaining limited to
the narrow domestic market. They receive global-level consulting and network connections.
Those with good prospects for competing in the overseas market, as determined by domestic
performance, are linked with local overseas infrastructure and networks supported so that
they can challenge the global market as quickly as possible. For strategic export areas like
Silicon Valley and China, they can receive relevant help through the Overseas ICT
Supporting Center, Korea Venture Startup Center and diplomatic offices (Small and Medium
Business Supporting Center), etc.
The Ministry of Science, ICT and Future Planning established a Global Startup Center
17
on September 2013. This is a specialized agency that helps startup and venture companies to
target world markets. The center’s manpower includes international lawyers, accountants,
patent attorneys, venture investment specialists, and marketing specialists who help with
overseas market entrance and global startups. In the 13 months between September 2013 and
November 2014, the center provided consulting services in more than 2,539 cases for 662
companies. A total of 29 cases of investments have been recorded, equaling US$23 million.
4.4. Program for SMEs: Global Partnership Program
One of the private sector’s contributions to the further growth of ICT is the Global
Partnership Program, which aims to match highly competent Korean ICT SMEs with ICT
companies in emerging economies, especially telecom service operators, for collaboration
and partnership. Looking to create and expand markets, KAIT (Korea Association for ICT
Promotion) has been hosting the Global ICT Partnership Program since 2013. The objective
is to create a strategic business to business (B2B) meet-connect-partner platform for global
telecom operators (hereafter telcos) and Korean ICT SMEs.
KAIT organizes the Global ICT Partnership Program and One-on-One Business
Matching meetings where a delegation of global telecos and Korean ICT companies chosen
through a comprehensive filtering and matching process can meet to explore a partnership.
The program provides opportunities to exchange information related to Korea’s ICT products
and global market opportunities. The program also plays a bridging role for further
partnership, cooperation, and ventures of mutual benefit. In a recent partnership program a
total of 41 overseas ICT companies from fourteen countries attended business meetings that
scaled up to US$54.4 million. The ICT Partnership Program held October 20-21, 2014 in
Busan featured participation by 51 overseas ICT companies from seventeen countries and
resulted in a contract amount of US$100 million. KAIT is confident that the partnership
program will serve as a platform for ICT companies looking for breakthroughs in the
competitive market and cooperative development such as revenue sharing.
18
Table 6 Global Partnership Program result in 2014
Date Lists of Countries Number of
Companies
Results
(Unit:10,000 USD)
17~18 April, 2014 Rwanda, Tanzania 12 1,100
20~21 May, 2014 Bangladesh, Malaysia, Vietnam, 5 1,180
24~25 June, 2014 Bangladesh, Cambodia, Fiji,
Indonesia, Mongolia, Vietnam 10 1,590
3~4 Sep, 2014 India, Kazakhstan, Papua New Guinea 4 1,570
Total 14 Countries
(Asia 11, Africa 2, Eastern Europe 1) 41 5,440
5. Case Studies We illustrate how ICT can contribute to increased productivity with two case studies. The
first shows how large firms can support SMEs’ productivity with ICT. The second case is
about how the latest emerging technology, IoT, is applied to farming.
5.1. Joonggok Jeil Traditional Marketplace and ICT Technology The first case involves convergence of ICT application and non-ICT. Joonggok Jeil
Traditional Marketplace is located in the northern part of Seoul and was struggling because of
competition from large stores such as Emart and Homeplus, the Korean version of Walmart.
Nowadays Koreans tend to shop at large markets with convenient parking and easy access to
many types of products, from clothing to toys and groceries. These large markets even
provide both online and mobile services for consumers, including payment by credit card and
home delivery of purchases. In contrast, the traditional marketplaces usually prefer cash and
have rather small or no parking places. To solve these challenges, Joonggok Jeil Marketplace
issued prepaid gift cards and coupons in 2005; however, these efforts did not lure consumers
from the large markets.
In 2012, Korea's top mobile operator, SK Telecom, offered ICT solutions and
management and marketing support as a pilot project. It provided free internet connection to
shoppers by establishing the wired and wireless broadband connection within the market, and
touchscreen tablets were provided for free to the vendors. The tablet functions as an
19
electronic cash register and also features software to help small businesses improve their
performance, such as by checking inventory and sales data online. SK Telecom launched the
initiative in response to a call from the government for large companies to lend a hand to
smaller businesses struggling to stay competitive. With this project, digital coupons could be
issued easily through smart phones, and the Marketplace was able to provide an online and
mobile shopping service. The store owners who adopted the service provided by SK Telecom
saw sale revenue start to rise. In 2014, of 143 Marketplace stores, 51 percent now use the
service.
Image 1 Internet Access Devices installed at the Joonggok Jeil Marketplace
Source: SK Telecom, 2014.
5.2. Smart Farm8 This case shows ICT convergence with agriculture via smart phones and enabled by Korea’s
high-speed wireless networks and latest IoT technology. The project allows farmers to
remotely control the temperature and humidity of greenhouses and indoor farms. Through
smart farm application, farmers can open and close the ventilation system and sprinklers,
control watering and application of manures. Thus, farmers increase their efficiency and crop
production and also save time and expenses through increased labor productivity. Smart farm
also helps to prevent incidents such as cold weather damage. For example, when a power
failure in the middle of the night is sensed, the heating system of the greenhouse turns on
automatically.
8 The Smart Farm management project is a part of the pilot project of the IoT activation Plan, which is partly funded by the government.
20
Image 2 Smart Farm
Source: SK Telecom, 2014.
According to the Ministry of Agriculture, Food and Rural Affairs, farms that adopted
ICT showed a yield increase of 10 percent per 3.3 m², a decrease of 94 percent in
management time and expense. Farms that adopted ICT have reached sales volume of more
than US$500,000. SK Telecom has serviced 150 smart farms serviced since 2012, and in
2014. KT, Korea’s second largest mobile telecom service provider offered smart farm service
to mushroom farming in greenhouses. The convergence of ICT and the agriculture sector has
immense possibilities for growth.
6. Conclusion This research analyzes ICT’s role in Korea’s economic development. It shows how effective
the government’s policies, especially ICT policies, have been for economic growth.
Furthermore, it promises to be a useful tool not only for Korea but also for countries in Latin
America striving to reach a new frontier for continued growth. To this end, we have
considered Korea’s ICT policies in detail, while looking at ICT companies and their
successful expansion. By analyzing Korea’s ICT policies and trends, a better understanding is
gained concerning how Korea’s economy developed through ICT policies.
The success story of Korean ICT development could be summarized as follows. First,
there has been a strong and sustained political commitment to the informatization and
development of the ICT sector from the highest echelon of government: Administrations have
called for a strong initiative for nationwide informatization supported by a timely
comprehensive policy strategy and restructured government organization. The second factor
was human capacity building: Public informatization training programs bridged the digital
21
divide and at the same time boosted the self-sustaining ICT demand among a large segment
of the population. The third initiative was the creation of a competitive environment for
telecom service providers. The fourth government initiative leading to a successful ICT
industry was the development of basic ICT technologies.
Behind these four success factors, there were unique and powerful tools to support
development efforts. One of these was the ICT Promotion Fund established in 1996. The size
of this fund had risen up to several billions in US dollars by early 2000. Using this funding
mechanism, the Korean government could drive the implementation of its ICT master plans
very vigorously. The government invested a minimum of US$0.7 billion to a maximum of
US$1.5 billion yearly in ICT R&D, developing ICT human resources, standardization, R&D
environment creation and loans to ICT ventures. This fund was created right before the Asian
financial crisis in 1997 and operated smoothly in spite of the financial turmoil experienced
during the crisis.
With its successful ICT policies, Korea achieved remarkably rapid economic growth
while overcoming the global financial meltdown in 2008 as well as the Asian financial crisis.
It presently seeks a new growth momentum by pursuing a paradigm shift in ICT. In fact, the
Korean government now aims for further growth within a creative economy. It is promoting
momentum for new growth by introducing ICT into traditional industries while actively
helping competitive SMEs to venture into global markets. The first is often referred to in
terms of nutrition, with ICT playing the role of a vitamin. The prime example for the latter is
the Global ICT Partnership program, which allows products and technologies to be
exchanged at a low cost between domestic and foreign companies through a customized
program. In 2014, the program helped SMEs in Korea to engage in approximately US$100
millions worth of transactions with companies in Asia and Africa. As these companies learn
from ICT companies in Korea, mutually win-win opportunities are expected.
The centrality of ICT has major implications for SMEs and the government. ICT
adoption improves efficiency and productivity, and can enhance opportunities for innovative
investment. Securing market opportunities and encouraging investment are among the most
important priorities. Even though ICT is critical for a company to generate higher profits in a
competitive market, it also entails limitations because of the higher cost of managing
employees and investing in R&D. To overcome such limitations, mutual collaboration and
support are needed for creating new markets and expanding existing markets, rather than
engaging in severe competition in a limited market. Therefore, companies need a
comprehensive perspective that looks through the entire process of improving its productivity
22
through ICT as well as considering a strategic managerial skill of efficiently using key
resources.
The importance of government policies should never be underestimated. A survey
showed that companies most wanted tax exemption for technological development (52.2%)
followed by support for commercialization (46%). Even though these are critical for SMEs,
only a small number of companies are practically enjoying such benefits. Therefore, financial
support needs to be expanded to promote SMEs. Needless to say, support should accompany
efforts toward less regulation to improve the current corporate environment. Furthermore, a
specific plan for managing the fund needs to be firmly established to ensure that it will indeed
be used for R&D projects as originally intended. Finally, a user-centered ecosystem needs to
be established. As ICT becomes ever more sophisticated, the center of gravity in its
ecosystem is shifting from the market to users. Therefore, for the sake of efficient investment,
companies need to approach investment decisions strategically in terms of when, where and
how to invest. In addition, continuous dedication needs to be devoted to creating new markets
through ICT. In other words, avenues for new growth need to be continuously explored by
converging traditional industries with ICT.
23
References
Bank of Korea (2014), Economic Growth Contribution.
ETRI (2000), IT Industry Trend Report.
Institute for Information and Communication Technology Promotion (2014), Trade Balance
of ICT Industry of Korea.
ITU (2014), Measuring the Information Society.
KAIT (2014), Information & Communication Technology Survey.
Korea Public Administration Research, Volume 22, pp.165-195.
LG Electronics (2014), LG Electronics IR Report 2013.
Korea Association for ICT Promotion (KAIT) (2014), ICT Industry Status Survey.
Ministry of Information and Communication (MIC) (2000), White Paper 2000 (in Korean)
Ministry of Information and Communication (MIC) (2001), National Informatization White
Paper 2001 (in Korean)
Ministry of Information and Communication (MIC) (2005), Broadband IT Korea 2005 (in
Korean)
Ministry of Science, ICT and Future Planning (MSIP)(2013), IoT Activation plan.
Ministry of Science, ICT and Future Planning (MSIP) (2015), Statistics on Fixed Broadband.
Samsung Electronics (2014), Samsung Electronic Sustainability Report 2014, June.
Websites
Bank of Korea Economic Statistics System (http://ecos.bok.or.kr)
DAUMKAKAO (http://www.daumkakao.com/main)
International Trade Statistics 2014 (World Trade Organization)
KT (http://www.kt.com/main.jsp)
LG Electronics (http://www.lge.co.kr/lgekr/main/LgekrMainCmd.laf)
LGU+ (http://www.uplus.co.kr/)
NAVER (http://www.naver.com/)
OECD Broadband Portal (http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm)
Samsung Electronics (http://www.samsung.com/sec/home/)
SK Telecom (http://www.sktelecom.com/index_real.html)
SK Communications (http://corp.nate.com/)